Gaza ceasefire holds but mistrust runs deep

GAZA/JERUSALEM (Reuters) - A ceasefire between Israel and Hamas held firm on Thursday with scenes of joy among the ruins in Gaza over what Palestinians hailed as a victory, and both sides saying their fingers were still on the trigger.

In the sudden calm, Palestinians who had been under Israeli bombs for eight days poured into Gaza streets for a celebratory rally, walking past wrecked houses and government buildings.

But as a precaution, schools stayed closed in southern Israel, where nerves were jangled by warning sirens - a false alarm, the army said - after a constant rain of rockets during the most serious Israeli-Palestinian fighting in four years.

Israel had launched its strikes last week with a declared aim of ending rocket attacks on its territory from Gaza, ruled by the Islamist militant group Hamas, which denies Israel's right to exist. Hamas had responded with more rockets.

The truce brokered by Egypt's new Islamist leaders, working with the United States, headed off an Israeli invasion of Gaza.

It was the fruit of intensive diplomacy spurred by U.S. President Barack Obama, who sent his secretary of state to Cairo and backed her up with phone calls to Israeli Prime Minister Benjamin Netanyahu and Egyptian President Mohamed Mursi.

Mursi's role in cajoling his Islamist soulmates in Gaza into the U.S.-backed deal with Israel suggested that Washington can find ways to cooperate with the Muslim Brotherhood leader whom Egyptians elected after toppling former U.S. ally Hosni Mubarak, a bulwark of American policy in the Middle East for 30 years.

Mursi, preoccupied with Egypt's economic crisis, cannot afford to tamper with a 1979 peace treaty with Israel, despite its unpopularity with Egyptians, and needs U.S. financial aid.
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